Achieving Smooth Asymptotics for the Prices of European Options in Binomial Trees

نویسنده

  • MARK S. JOSHI
چکیده

A new binomial approximation to the Black–Scholes model is introduced. It is shown that for digital options and vanilla European call and put options that a complete asymptotic expansion of the error in powers of n−1 exists. This is the first binomial tree for which such an asymptotic expansion has been shown to exist.

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تاریخ انتشار 2007